Duplex Chick

Comment

There are several questions I get asked repeatedly in my job. One of the most common is, “What did it sell for?”

I usually hear this when a client was interested in and missed out on a property that just went from “Active” status on the MLS to “Pending”.

The trouble is, I can’t answer this question. At least not right away.

When a property owner has accepted an offer, there is a gap between his or her signing the document and the sale closing. Unless the buyer is purchasing with cash or a contract-for-deed, it usually takes 30 to 60 days for the a loan to be readied in order for the property to change hands.

In this waiting period (which is called “escrow” in states like California), there is still a possibility that the sale may not come together. The buyer may be unable to obtain financing, suddenly receive notice of a job transfer…while not necessarily common, things do happen.

Were either the buyer or seller’s agent to share what the final negotiated sales price was during this time, and the transaction not close, the seller’s position in the marketplace could be seriously compromised.

How so?

Well, it would be public knowledge what the seller “would take” for the property. If he then needed to put his duplex back on the market, he would not be able to do so at a price higher than the one he had just agreed to; at least not without looking greedy.

I can eventually tell you what that duplex sold for…just as soon as the keys change hands.

Comment

Seasoned real estate investors know there are many advantages to owning income property; benefits like cash flow, principal pay down, and the tax deductions for loan interest and depreciation.

Most new investors are familiar with all of those terms except depreciation. So, what is it? Well, it’s an accounting term that basically says assets wear out or get used up over a period of time. Depreciation is a way to spread the purchase cost of something over the number of years it’s expected to last before it finally wears out.

Understandably, different kinds of things have different lifespans. A refrigerator, for example, has a shorter lifespan than oh, say, a garage. Therefore, it has a faster depreciation schedule. Land, on the other hand, never gets used up. I hate to be the bearer of bad news, but even if greenhouse gas gets the best of us, the land will still be here. We won’t.

Somewhere along the line, Congress, and the accountants, businesses, and I suppose, even the I.R.S. got together and decided that if you’re going to invest in America — through real estate, or a business, you should get a break on your taxes. Collectively, they came up with something called a depreciation schedule for four different categories. The categories are:

• Land – which, of course, never gets used up. No tax break here.
• Personal Property – in a rental, this would be things like the appliances. Personal property has a 5 year depreciation schedule.
• Building – For residential property, 27.5 years, for other types of property it’s 39 years.
• Land improvements – includes landscaping, driveways, the garage, the water line. This is spread over 15 years.

Read the rest of this entry »